Abstract: Provided are a method of forming an insulating layer and a method of manufacturing a transistor using the method. The method of forming the insulating layer includes forming a preliminary insulating layer including silicon oxide (SiO2) on a silicon (Si)-containing substrate. A reactive gas containing ammonia (NH3) gas is supplied to the preliminary insulating layer. Nitrogen radicals (N*) and hydrogen radicals (H*) are generated from the ammonia gas using plasma. The hydrogen radicals combine with oxygen of the preliminary insulating layer, and the nitrogen radicals combine with the silicon oxide so that an insulating layer including hydroxides (OH) and silicon oxynitride (SiON) can be formed.